Myanmar to give central bank more autonomy

Myanmar to give central bank more autonomy

Myanmar is set to enact a new law in the coming days giving greater independence to its central bank, officials said Wednesday, in the latest economic reform aimed at enticing foreign investors.

The new legislation was approved by lawmakers on Monday and is expected to be signed into law by President Thein Sein by this weekend, although the details have not yet been made public.

"The significant thing is that the central bank will be an independent body and will not be under the finance and revenue ministry anymore," a central bank official who did not want to be named told AFP.

"The central bank's mandate will be in line with international standards," the official said, adding that the president would appoint a governor and three deputy governors with the approval of parliament.

An official in Thein Sein's office said the former general would sign the bill before he leaves on a visit to Europe on Sunday.

Myanmar's quasi-civilian government has announced a series of political and economic reforms since coming to power more than two years ago following the end of nearly half a century of military rule.

In April of last year it began to overhaul Myanmar's complex foreign exchange system in a bid to facilitate trade and investment.

An independent monetary policy is seen as a hallmark of a modern free-market economy, but it is unclear how much freedom the Central Bank of Myanmar (CMB) will enjoy.

Its main role up to now, experts say, has been to print money to fund the government's budget deficit.

Unlike independent central banks such as the US Federal Reserve or the European Central Bank, the CBM does not increase or reduce official borrowing costs as a way of preventing the economy overheating or cooling too rapidly.

"It would be very hard for the CBM to conduct an effective anti-inflation monetary policy if it simultaneously had to lend to the government through bond purchases to finance the budget deficit," said Sean Turnell, a Myanmar economic expert at Australia's Macquarie University.

"In other words, government spending and taxation matter too," he added.

A lack of technical expertise is seen as another hurdle for the central bank.